BAD and getting WORSE
“The United States has already slipped into a deep recession that could be the most serious since World War II, said Martin Feldstein, president of the Cambridge group that is considered the official word on economic cycles.
“The situation is bad, it’s getting worse, and the risks are that the situation could be very bad,” Feldstein said in a speech yesterday at a financial industry conference in Boca Raton, Fla.
Feldstein, president of the National Bureau of Economic Research and a professor of economics at Harvard University, said the chief causes of the shrinking economy are sinking housing prices, months of job losses, and turmoil in the financial markets.
MOST SERIOUS SINCE WWII? How about since The Great Depression.
In 1929 relatively few had money invested in the market. Consumers put 35% down on their homes and carried 8 year mortgages. Our population was young and we had growing industries preparing to sell good around the world. The debt burdening our cities and states was relatively small.
Fast forward to 2008. Many individuals and municipalities are leveraged to the hilt. Our population is aging and many pension plans are very underfunded. Healthcare costs have spiraled out of control.
Why? Because between 2000 and 2007, our financial system loaned out Trillions and Trillions of dollars to slosh around the economy. The profits for our financial system mushroomed and our citizens partied like it was 1999 just before the Dot.Com crash.
Now the situation has come to a head. There is too much debt and too little money and assets to pay it back. Cities can't pay their workers. Individuals can't pay their mortgages. Banks becoming insolvent. Poor Uncle Ben just spent $400 Billion of his $800 Billion putting a band aid on a multi Trillion dollar problem.
The question now is how do we solve this mess.....and a BIG mess is what we face. We could lower interest rates further, devalue the currency and impoverish Americans by creating such high prices few would be able to afford or we could simply take responsibilty for our actions, restructure where needed, and when the pain is over move forward on a much stronger foundation.
If what we face is only a recession, then I have a bunch of bridges for sale all around America.